*4.1.3 Reward-based crowdfunding*

*Banking and Finance*

institutions operate.

*4.1.2 Equity-based crowdfunding*

The investment on social lending platforms can take place—typically—in two ways. The first involves the subdivision of a single loan into shares (generally of the same value) that investors can purchase independently on the portals. The second mode, on the other hand, involves the presence of portals that create loan portfolios with the same risk-return ratio that can be purchased pro-rata. It is also possible that the money of the lenders is divided into several portfolios with the same risk-return ratio, so as to reduce—even more—the potential risk of insolvency. In addition to this, some platforms also offer the possibility of reselling their credits to third parties, so as to return more quickly than the investment, so creating a secondary market. It is customary to distinguish between two main business models for social lending: direct and widespread. The two types differ depending on the fact that investors decide, directly and independently, where to allocate their resources (direct model) or indirectly through the platform (common model). Since the end of 2017, the use of social lending has begun to spread for the payment by installments on e-commerce sites. In Italy, aggregated data only for loans for natural persons are diffused and these loans vary from a minimum of € 250.00 to a maximum of € 40,000.00. A research by the Politecnico of Milan [18] found that access to this channel is generally more expensive than that in which credit

Equity-based crowdfunding is one of the tools most used by start-ups and SMEs, which, especially in the start-up phase of a business, find it difficult to access subsidized loans or government grants, although they have the required requirements. It assumes the role of equity-based when, as a consideration for the financing activity, the conferment of a participation title within a company is present. This type of crowdfunding guarantees the possibility of addressing to a more or less wide audience, thanks to which the initial feedback on their entrepreneurial activity can be seen from the initial phase. Furthermore, the only costs that the promoters will have to pay, using the platform, are mostly those linked to the commissions to be paid to the portal and to the cost of keeping the restricted current account. However, the start-up or the SME must operate in such a way as to create an intense flow of communication with the outside if it wants to reach a larger number of investors. It is possible, for example, by releasing interviews, publishing its objectives also on social media, participating or sponsoring some events of significant importance. This is still an extraordinary transaction concerning the collection of new risk capital, and therefore there are some repercussions on the level of patrimonial and administrative rights, because the

company structure changes according to the number of interested investors.

As already highlighted, in Italy, Consob issued a regulation in 2013 in which the limits and obligations to be respected regarding the equity-based crowdfunding were indicated. In particular, Consob has set a maximum bid amount of 5,000,000 euros, which can only be collected through the use of the portals registered in the special section of the register of managers. Managers are obliged to provide all information regarding SMEs or start-ups registered in the portal, with a focus on individual offers, thus detailing the business plan, the curriculum vitae of the founding members and the risks associated with equity-based activities crowdfunding. This is realized to reduce information asymmetries and to allow investors to make a rational and informed investment choice of their capital. Consob has also provided for a "conscious investment path" reserved for potential investors, thanks to which they can know the most difficult aspects linked to the activity of granting credit. Moreover, for non-professional lenders, the Regulation provides for the recognition of the right of withdrawal to be exercised even without the existence of

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With the term reward-based crowdfunding, a particular online fundraising method is outlined that envisages, on the one hand, the payment by the investor of a small amount of money, and on the other hand the payment by the taker of a reward. This reward can be various, but in general, it cannot include financial compensation. The borrower is therefore obliged to provide the service or to proceed with paying the reward, because, in the event of non-fulfillment of this promise, the project could lose credibility to the lenders; however, some platforms are used to frame the consideration of the subject as a real obligation to perform, from which the typical effects provided by the law arise. Over the years, reward-based crowdfunding has become widespread above all in the artistic field, in which the promoters of cultural and musical projects found the necessary funds for the realization of the projects, providing in exchange various benefits, such as free tickets, public mentions during the events, preemptive fees for the purchase of tickets.

Over time, it has become a perfect substitute of equity because it allows to obtain liquidity without altering the corporate structure. At the same time, it has also become an alternative way to get answers from consumers on new projects to carry out: in this case, the form is defined pre-placement, most often linked to a pre-order operation with the goal to get feedback from potential customers even before the product is launched. Even some large multinationals like Nike and Coca-Cola have decided to use this tool, lightening the workload traditionally entrusted to marketing companies. This method is particularly preferred by start-ups of young people and by SMEs in the constitution phase, which wish to obtain information on the outlet market [15].

In Italy, the reward-based crowdfunding model is associated to three legal categories. The first is the pre-order that is an operation that the Civil Code defines as e-commerce, which concerns a future sale that is perfected with the realization of the good. The second, again on the basis of the Civil Code, is a modal donation (art. 793 c.c.) with which the donor requires the donor to perform an obligation to his advantage or for the benefit of third parties. The third type is the royalty crowdfunding, which will be discussed below.
